Nigeria just became independent today (or yesterday, depending on your timezone). Maybe you thought Nigeria was already independent, but not so. The country was shackled by heavy foreign debt. Today, it shook off those shackles by paying the last dollar of its debt to the Paris Club countries. This is a milestone for Africa, because Nigeria is the first country to achieve this.

Here's the story, as reported by the BBC:

Quote:

Nigeria settles Paris Club debt
Nigeria has paid off its multi- billion dollar Paris Club debt, becoming the first African nation to settle with its official lenders.
The move may clear the way for greater government spending on infrastructure, healthcare and education, and is hoped will prompt greater foreign investment.

Nigeria has undertaken a programme of economic reforms and the oil exporter has been helped by record crude prices.

The Paris Club is a group of 19 lenders including the UK, Russia, and Germany.

After the $4.6bn payment, Nigeria still will owe about $5bn to other lenders, including the World Bank and the private sector.

Nigeria is one of the world's biggest oil exporters, but it is also one of the world's poorest countries, with the majority of the population living on less than $1 per day.

The government is now benefiting from high oil prices, despite production problems and unrest in the Niger Delta region.

During the years of military dictatorship, little of Nigeria's oil wealth reached the average person. The current government is seeking the recovery of billions of dollars put away in Swiss bank accounts by General Abacha.

Long history

The country's debts date back to the early 1980s, and had ballooned to more than $35bn due to penalties and late fees during the 1990s.

Last year the country agreed to a repayment plan that was a mix of cash and debt relief, backed by the country's burgeoning oil revenues.

Nigeria agreed to pay the Paris Club $12.4bn (£8.2bn) in exchange for the remainder of its $30bn official debts being written off.

Nigeria's plan to pay off its debt and restructure its economy was approved by the International Monetary Fund (IMF) earlier this week.

The debt repayment is a key part of the economic reform plan of President Olusegun Obasanjo, who is also planning a string of privatisations, tax reform, and greater transparency in order to boost the economy and attract foreign investors.

Nigeria has already been removed from an international credit blacklist, and now has credit ratings similar to other emerging market countries such as Turkey and Ukraine. That means the government is now able to borrow money on international capital markets on favourable terms.

Different from HIPC

Nigeria has followed a different path from other African countries who have been burdened with debt.

It was not included in the list of highly indebted poor countries (HIPC) that were eligible for 100% debt relief from official lenders, the IMF, and the World Bank, due to its oil wealth.

However, those countries have been subject to stringent conditions and long delays before they qualified for debt relief.

Nigeria has been able to negotiate its own debt deal at its own pace because it has the funds to partially pay off its creditors, who were happy to accept a smaller overall payment in return for cash upfront.